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abuse, accuracy, adequately, allocated, assignment, attract, attribution, Carolina, Chancery, Charleston, compete, conduct, corrective, Court, coverage, customer, Delaware, delay, departed, derive, Detroit, directed, director, discontinuation, discourage, discovered, document, downstream, effectively, employ, employee, encounter, establishing, exclusive, exercise, extensive, face, formation, forum, governmental, HIPAA, hold, holding, implicate, imposed, inability, inaccurate, inadvertently, incorporation, incorrect, increasing, initiated, internet, Investor, Jackson, judicial, lack, LIBO, limit, longer, lowering, Maine, manner, marketing, medicine, Minnesota, modifying, North, offer, partially, Paul, person, Portland, preliminary, profitability, prohibit, project, proposed, regulating, regulatory, reimbursement, rely, renewed, reputation, response, responsibility, restated, restrict, scale, size, South, spread, St, Statesville, statutory, stepping, substantial, sufficiently, target, telemarketing, temporary, Tennessee, twelve, unit, venture
Financial report summary
?Risks
- We have a history of net losses, we anticipate increasing expenses in the future, and we may not achieve or maintain profitability.
- Any failure by us to identify and develop successful new geographies, physician partners and payors and to successfully execute upon our growth initiatives and achieve required operational scale to support our growth may have a material adverse effect on our business, financial condition, cash flows, and results of operations.
- We may be unsuccessful in executing our operating strategies, or we may not achieve results consistent with our historical performance.
- Amounts of medical expenses that are incurred on behalf of our members may exceed the amount of medical revenues we receive to provide care for such members.
- As we expand into new geographies, we may be unable to secure contracts with MA payors, or such contracts may be established at less favorable financial terms than are necessary to meet our financial targets.
- We incur startup costs during the initial stages of development of our physician partner relationships and program initiatives, and if we are unable to maintain and grow these physician partner relationships or program initiatives over time, we may not recover these costs.
- We may require substantial additional capital to support our business in the future, and this capital might not be available on acceptable terms, or at all.
- Significant reduction in our membership could have an adverse effect on our business, financial condition, cash flows, and results of operations.
- The transition to a Total Care Model may be challenging for physician partners.
- Public health crises, such as COVID-19, could adversely affect us.
- Our estimates of our members’ risk adjustment factors, medical services expense, incurred but not reported claims, and earnings pursuant to payor contracts could be inaccurate.
- Restrictive clauses in some of our contracts with physician partners may prohibit us from establishing new RBEs within certain geographies in the future, and as a result may limit our growth.
- Exclusivity provisions in some of our agreements with physician partners could subject us to investigations or litigation.
- We rely on our management team and key employees, and our business, financial condition, cash flows, and results of operations could be harmed if we are unable to hire and retain qualified personnel.
- We may never realize the full value of our intangible assets, which could cause us to record impairments that may negatively affect our financial condition and results of operations.
- Security breaches, cybersecurity attacks, loss of data and other disruptions to our information systems could compromise sensitive information related to our business and expose us to liability, which could adversely affect our operations, financial condition, cash flows and results of operation.
- If we are unable to protect the confidentiality of our know-how and other proprietary and internally developed information, our operations could be adversely affected.
- Our subsidiaries’ lack of performance or ability to fund their operations could require us to fund such losses.
- ESG issues may impact our business, our financial outcomes, and our reputation.
- We are economically dependent on maintaining our contracts with a limited number of key payors.
- Our contracts with our payors are for limited terms and may not be renewed upon their expiration.
- We rely on our payors for membership attribution and assignment, timely data and reporting accuracy and claims payment.
- We are dependent on physician partners and other providers to effectively manage the quality and cost of care and perform obligations under payor contracts.
- Difficulties in obtaining accurate and complete diagnosis data could have adverse consequences.
- We depend on physician partners to accurately, timely and sufficiently document their services, and their failure to do so could result in nonpayment for services rendered or allegations of fraud. If any diagnosis information or encounter data are inaccurate or incorrect, claims or encounter data submissions to payors may not be compliant, resulting in potential overpayments, possible recoupments and possible liability under the federal FCA or through RADV audits.
- We rely on third-party software and data to operate our business and provide services to our members and physician partners, and any restrictions on our use of, or ability to license, such third-party resources could adversely affect our business, financial condition, cash flows, and results of operations.
- We rely on third-party internet infrastructure and bandwidth providers for our operations, and any failure or interruption in the services provided by these third parties could negatively impact our ability to operate and our relationships with members and physician partners and adversely affect our business, financial condition, cash flows, and results of operations.
- Consolidation in the healthcare industry could have a material adverse effect on our business, financial condition, cash flows, and results of operations.
- Substantially all of our total revenues relate to federal government healthcare programs, and reductions in their reimbursement rate or methodology applied to derive reimbursement, or discontinuation of such healthcare programs, would adversely affect our business, financial condition, cash flows, and results of operations.
- Uncertain or adverse economic and macroeconomic conditions, including a downturn or decrease in government expenditures, could have a material adverse effect on our business, financial condition, cash flows, and results of operations.
- We operate in a competitive industry, and if we are not able to compete effectively, our business, financial condition, cash flows, and results of operations will be harmed.
- Our compensation and reputation are dependent on government performance standards and benchmarks, some of which depend on factors outside our control.
- Government funding for healthcare programs is subject to statutory and regulatory changes, administrative rulings, interpretations of policy and determinations by intermediaries and governmental funding restrictions, all of which could materially impact program coverage and reimbursements for both institutional and professional services.
- Regulatory proposals directed at containing or lowering the cost of healthcare, including the ACO REACH Model, and our participation, voluntary or otherwise, in such proposed models, could impact our business, financial condition, cash flows and operations.
- We, as well as our physician partners and affiliates, have in the past, and could in the future, be subject to federal and state investigations, audits and enforcement actions.
- We may be subject to regulatory inquiries and corrective action plans imposed by our payors and may be required to contribute a material amount of risk-bearing capital to our local operating subsidiaries.
- Repayment obligations arising out of payor audits, such as CMS RADV audits, can be significant and adversely impact reimbursement rates.
- CMS may modify the methodology utilized to determine revenue associated with MA members, including but not limited to the CMS Risk Adjustment Processing System for calculating risk adjustment factors, which could adversely impact us.
- Negative publicity regarding the managed healthcare industry generally could adversely affect our results of operations or business.
- The healthcare industry is heavily regulated at the federal, state and local levels and government authorities may determine that we fail to comply with applicable laws or regulations and take actions against us.
- If our physician alignment strategies with our physician partners—including the formation of risk and shared savings pools, making downstream payments and joint venture arrangements—are not in compliance with the state and federal fraud and abuse laws, including physician incentive plan laws and regulations, we could be subject to penalties.
- Our business development and member engagement activities may implicate laws and regulations regarding marketing, beneficiary inducements, telemarketing and use of protected health information.
- Our physician partners are subject to federal and state healthcare fraud and abuse laws and regulations.
- Our use, disclosure and processing of personally identifiable information, PHI, and de-identified data is subject to HIPAA and state patient confidentiality laws, and our failure to comply with those regulations or to adequately secure the information we hold could result in significant liability or reputational harm and, in turn, cause a material adverse effect on our members, revenue, and operations.
- Failure to obtain or maintain an insurance license, a certificate of authority or an equivalent authorization allowing our participation in downstream risk-sharing arrangements with payors could subject us to significant penalties and adversely impact our operations.
- Laws regulating the corporate practice of medicine could restrict the manner in which we are permitted to conduct our business, and the failure to comply with such laws, or any changes to such laws or regulations or similar laws or regulations could subject us to penalties and restructuring or have a material adverse effect on our consolidation of the accounts of our majority-owned subsidiaries.
- If we or our physician partners inadvertently employ or contract with an excluded person, we may face government sanctions.
- We may face lawsuits not covered by insurance and related expenses may be material. The costs to defend and pay any judgment or settlement could negatively impact our business, financial condition, cash flows, and results of operations.
- Changes in tax laws and regulations, or changes in related judgments or assumptions could materially impact our financial condition and results of operation.
- Despite our indebtedness levels, we and our subsidiaries may incur substantially more indebtedness, which could increase the risks created by our indebtedness.
- The agreements and instruments governing our indebtedness contain restrictions and limitations that could significantly impact our ability to operate our business.
- agilon health is a holding company with no operations of its own, and it depends on its subsidiaries for cash to fund all of its operations and expenses, including to make future dividend payments, if any.
- Anti-takeover provisions in our Certificate of Incorporation and By-laws could discourage, delay or prevent a change of control of our company and may affect the trading price of our common stock.
- We do not intend to pay dividends on our common stock for the foreseeable future and, consequently, your ability to achieve a return on your investment depends on appreciation in the price of our common stock.
- Our Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or stockholders.
- We have identified a material weakness in our internal control over financial reporting. If we are unable to remediate this material weakness, or if we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial results, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports and, as a result, our common stock price may be adversely affected and we may be unable to maintain compliance with NYSE listing requirements.
Management Discussion
- in our existing geographies. The increase in medical services revenue for the three months ended March 31, 2024 was also driven, to a lesser extent, by an increase in PMPM capitation rates of 7%.
- Medical services expense increased for the three months ended March 31, 2024 due primarily to growth in average membership of 43%, which was attributable to seven new geographies that became operational in 2024 and growth in our existing geographies. The increase in medical services expense for the three months ended March 31, 2024 was also driven, to a lesser extent, by an increase in average medical services expense per member of 13%.
- Other medical expenses increased by $1.8 million, or 2%, for the three months ended March 31, 2024 compared to 2023. Partner physician incentive expense decreased by $7.9 million to $49.8 million in 2024 compared to $57.7 million in 2023. Other provider costs increased by $11.4 million to $35.0 million in 2024 compared to $23.6 million in 2023, resulting from the increase in the number of geographies and members on our platform. Other provider costs for the three months ended March 31, 2024 include $0.6 million of costs related to geographies that are expected to become operational in January 2025, while other provider costs for the three months ended March 31, 2023 include $2.3 million of costs related to geographies that became operational in 2024.